Improving the U.S. State Department’s Effectiveness in International Economic Policy

Fifteen years into the 21^st Century, it is clear that economics is increasingly a central feature of international relations. Driven by the Internet revolution, global supply chains, and changing patterns of energy supply and demand, the world is transforming at a pace that governments are struggling to match; it is more multipolar, more complex, more integrated, and more competitive than the United States has ever experienced in its history. U.S. competitors and strategic allies alike – Brazil, China, the European Union, Japan, India, and Russia – are seeking to amass economic power and to deploy it as a leading element of their foreign policies. In many cases, they are seeking strategic advantages through these efforts, often at the expense of U.S. interests. In this rapidly changing environment, the United States needs to raise its game in international economic policy to sustain global leadership.

Successful international economic policymaking is a two-sided coin: it involves using diplomatic tools to advance U.S. economic and commercial interests, and using economic policy as a strategic tool in support of better foreign policy outcomes. The U.S. government needs to do better on both sides of this coin (and not just in commercial diplomacy). The State Department, the U.S. government’s premier foreign policy agency, has a vital role to play in formulating U.S. international economic policy objectives and in achieving those goals.

However, when it comes to State’s capabilities in international economic policy, the whole is often not equal to the sum of its parts. State’s comparative advantage resides in its global “reach” to every country in the world, and its substantive “reach” across nearly every economic policy discipline and to nearly every U.S. government agency involved in international economic policy. Yet, State is not perceived among interagency players as wielding these advantages optimally to advance U.S. international economic policy agendas.

In our paper, “Economic Statecraft Redux,” Bob Pollard and I identified a number of structural issues within the State Department that are impeding its ability to contribute optimally on international economic issues. A multiplicity of offices with crossing lines of authorities and communications often leads to internal competition, confusion, delay, and inferior products and services. Regional bureaus, which dominate State’s internal policy debates, tend to focus on current policy issues, rather than taking a more strategic view of global, regional, and economic issues that impact foreign relations. Finally, we noted that the continuous turnover of Foreign Service officers in domestic positions disadvantages State in the interagency process, as they are often dealing with counterparts who have greater specific economic policy expertise and longstanding personal relationships within the policy community.

Other interagency actors also affect State’s international economic policy performance. The increasing “globalization” of previously domestic issues, from law enforcement to health and environmental policies, among others, has made economic policymaking more complex and led to the expanding presence of other U.S. agencies abroad – which in turn has impacted how the State Department engages in international economic policy. As this evolution has progressed, State has been marginalized from international economic policy decision-making, such that it has become the province of specialized economic policy agencies – Treasury, USTR, Commerce, Energy, and others. Simultaneously, the NSC has increasingly arrogated to itself more decision-making while also usurping a growing share of operational diplomatic activity, further undermining State’s role.

To address these challenges, we made an overarching recommendation that the State Department become more customer-oriented in its provision of services to its interagency economic policy partners and to the U.S. business community. To achieve this objective, we suggested that State should capitalize on its global and interdisciplinary “reach” to develop and disseminate integrated policy analyses and recommendations to customers. For their part, State’s customers should actively seek high quality, value-added analysis of foreign countries to support their work advancing U.S. international economic policy agendas.

A change in State’s orientation toward international economic policy must also be accompanied by specific reforms in at least five broad areas. First and foremost, effective State Department involvement in international economic policy starts with leadership, most importantly from the Secretary of State, the Under Secretary for Economic Growth, Energy, and the Environment, and the regional assistant secretaries. Second, regional assistant secretaries should increase their bureaus’ economic policy capacity through appointing a career economic officer to serve as deputy assistant secretary responsible for regional economic affairs and standing up a regional economic policy office. Third, our ambassadors and Foreign Service officers must have the substantive knowledge on increasingly complex international economic policy issues to advocate effectively for our policy agendas. The Department should upgrade its professional training programs accordingly. Fourth, investment in professional development of economic officers should be encouraged through assignments as principal officers in major world commercial centers and through details outside the Department to other economic agencies, think tanks, state and local governments, regional development banks, and international financial institutions. Finally, the NSC should include State economic officers in its regional affairs and economic policy offices and ensure that all interagency economic policy partners are sharing information and participating fully in interagency decision-making.

The current Trans-Atlantic Trade and Investment Partnership (TTIP) negotiations illustrate the importance of State’s value to the U.S. international economic policy agenda. The entry into force of TTIP will not only increase trans-Atlantic economic cooperation, it will also serve a strategic purpose by revitalizing the North Atlantic relationship in the face of a rampant, revanchist Russia. Yet, Europe’s tri-level (Council of Europe, national parliaments, European Parliament) trade agreement approval process will be a new and challenging gauntlet to navigate, especially when anti-Americanism is a strong current in European politics. Our embassies in Europe will need appropriately trained and experienced ambassadors and Foreign Service officers to present effectively and accurately to Europe’s government leaders, parliamentarians, and public the agreement’s economic opportunities and strategic rationale. Hopefully, the State Department has already developed a strategic plan for this effort and is in the process of identifying and developing the human resources to implement it.

Two thousand years ago, Roman Senator Marcus Tullius Cicero said “the sinews of power are money, money, and more money.” This observation is as true for the 21^st Century as it was in the first century BCE. In today’s highly competitive, multipolar world, effective international economic policy will determine whether the United States maintains its global competitiveness and global leadership. Much will depend on our ability to connect with the 95% of global consumers who live outside our borders. In many ways, the Americans who will make the first impressions on those potential customers will be our ambassadors and career Foreign Service officers stationed in our embassies and consulates overseas. They need to have the skills and tools not only to present America in a compelling way to those customers, but also to advocate effectively to foreign governments our economic policy agendas. Including our recommendations in the State authorization bill currently being crafted by the Senate Foreign Relations Committee would be a good first step towards strengthening the Department’s international economic policy capabilities.

Greg Hicks is a State Department fellow at CSIS. The views expressed herein are those of the authors and do not necessarily reflect the views of the U.S. Department of State or the U.S. government.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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